There is a lot going on right now that’s impacting the property market, both in terms of direct legislation and the wider economy:
• Global conflicts affecting consumer confidence and interest rates
• Ongoing cost of living issues challenging affordability for homeowners and renters
• The recent introduction of key measures in the Renters’ Rights Act (RRA)
• Upcoming leasehold changes and reform of energy performance certification standards, both announced in the latest King’s Speech
However, this is really nothing new! Over the past couple of decades, we have experienced a worldwide recession; a pandemic; rocketing inflation; a huge number of lettings legal changes, mainly around licensing and safety standards – and both lettings and sales have proved resilient.
Landlords all around the UK are making good rental returns. According to Zoopla, as of March this year:
• The overall UK average yield is 5.8%
• The North-East tops the regions with an average yield of 7.9%
• Some Northern cities are achieving more than an 8% yield.
Although rental growth has slowed due to affordability issues, rents are still expected to rise through the rest of 2026, as supply is still almost 25% below pre-pandemic levels.
Average house prices remained flat in the year to March (according to government figures), but the number of mortgage approvals and transactions have been slowly increasing in recent months. And over the last decade, average UK prices have increased by £76,834 (40%), staying very slightly ahead of inflation, meaning properties have held their value, despite all the economic shocks and challenges.
The market is cyclic, so there will always be peaks and troughs, and both buy-to-let and home ownership should be viewed as a long-term investment.
But what can we expect to happen through the rest of this year?
Likely impact of the Renters’ Rights Act (RRA)
While the RRA brings in big changes for the rental market in England, these shouldn’t make much difference to good, compliant landlords from an operational point of view. Although fixed term tenancies and section 21 ‘no fault’ evictions have now disappeared, the reality is that average tenancies last 4 years (according to 2025 data from Dataloft). Plus, the vast majority of tenants pay their full rent on time, and disputes and contentious evictions are relatively rare.
However, there are two significant things we expect over the next six months as a direct result of the RRA:
1. With the rise in the maximum level of fines and increased government funding for local council enforcement efforts, we will probably see more landlords being penalised for breaking the law. And if Andy Burnham succeeds in returning to Westminster and playing a role in the leadership of the Labour Government, we can expect an even greater focus on regulation and enforcement, given his efforts in Greater Manchester, which has recently seen a 43% rise in landlord fines.
2. It’s likely to take longer for landlords to regain possession of their properties now that every contested eviction has to go to court. In 2025, the median average time from claim to landlord possession increased to 27 weeks, up from 24 weeks in the same period in 2024. Although court reforms and streamlining of the legal process has been promised, very little has actually been done so far. So the inevitable increase in the number of cases due to RRA is bound to slow things down even further in the immediate future.
Predictions for the economy
Although inflation fell slightly in April and GDP is remaining marginally positive, this has been mainly thanks to the lowering of the energy price cap and the cost of food and services not rising as anticipated.
However, for the rest of the year:
• The IMF is currently forecasting growth of 1%, down from the 1.3% it predicted in January.
• Independent forecasters predict inflation will rise from 2.8% in April to 3.5% by December, due to the energy price cap rising in Q3 and continuing high fuel costs.
• The Bank of England is forecasting inflation to peak slightly higher, at 3.6% by the end of the year. If the war in the Middle East continues and energy prices keep rising, it could hit over 6% in early 2027.
• The financial markets are now predicting that the Bank of England base rate is likely to rise again and may reach 4.25% in December – a whole 1% above the 3.25% that was forecast in February.
What’s likely to happen to mortgage rates?
Big lenders continued to cut rates in May, but if the base rate rises as expected in the second half of the year, mortgage interest rates will probably follow. Pricing is also being affected by general inflation expectations and the inter-bank lending rate (‘swap rate’), which is resulting in an uncertain mortgage market.
If you are on a variable rate or coming to the end of a fixed rate, it may be sensible to secure another fixed deal to avoid the risk of spiralling mortgage costs. If you would like to discuss your options now, our partners at Mortgage Scout will be happy to review your current mortgage deal.
And if you have any questions about your local housing market and what’s likely to happen over the next 6-12 months, just get in touch with your nearest branch and speak to one of our sales or lettings experts.
